Sandeep Kumar Goel Vs Union of India (Telangana High Court)
GST ITC Fraud: Telangana HC Grants Anticipatory Bail Where Evidence Already Secured; ₹94.96 Crore Alleged Fake ITC Case: Telangana HC Allows Anticipatory Bail; GST Arrest Cannot Be Mechanical When Custody Is Not Indispensable: Telangana HC; Telangana HC Grants Bail in GST ITC Case, Says Gravity Alone Cannot Curtail Liberty
Summary: Telangana High Court granted anticipatory bail to the petitioners, partners of M/s. Vijay Industrial Needs LLP, in an investigation concerning alleged fraudulent availment and utilisation of Input Tax Credit under the Central Goods and Services Tax Act, 2017. The Department alleged that the firm had fraudulently availed excess ITC of approximately Rs.94.96 crores, including nearly Rs.70.93 crores over and above the ITC reflected in GSTR-2A/2B, on invoices allegedly issued by fake or non-existent suppliers and without actual movement of goods. It was also alleged that multiple summons issued between June 2024 and June 2026 were not complied with and that custodial interrogation was necessary to trace the money trail, identify fictitious suppliers and beneficiaries, and investigate the alleged larger conspiracy.
The High Court held that economic offences involving large-scale evasion of public revenue constitute a serious class of offences requiring a fair and effective investigation. However, gravity of the allegation by itself cannot justify curtailment of personal liberty. The power of arrest under Section 69 of the CGST Act is neither mechanical nor automatic and can be exercised only where the statutory requirement of “reasons to believe” is satisfied on objective and tangible material. Arrest is an investigative measure and not a punitive one. The Court therefore examined whether custodial interrogation was genuinely indispensable or whether the investigation could proceed effectively without depriving the petitioners of their liberty.
The Court noted that searches had already been conducted and substantial documentary, financial and electronic material relating to the disputed transactions had been secured by the authorities. Petitioner No.1 had appeared in response to summons during earlier proceedings and his statement had been recorded. Although the Department alleged subsequent non-cooperation, the petitioners had communicated with the authorities, pursued legal remedies and unequivocally undertaken before the Court to appear whenever required and fully cooperate with the investigation. The Court further observed that adjudication of tax liability and criminal prosecution under Section 132 operate in distinct fields, but personal liberty cannot be examined solely from the standpoint of tax recovery.
Referring to the principles governing arrest laid down in Joginder Kumar v. State of U.P., Arnesh Kumar v. State of Bihar, Siddharth v. State of Uttar Pradesh, Satender Kumar Antil v. CBI, P. Chidambaram v. Directorate of Enforcement and Arvind Kejriwal v. Directorate of Enforcement, the Court reiterated that the existence of a statutory power of arrest is distinct from justification for its exercise.
It also considered GST-related precedents including Tarun Jain v. Directorate General of GST Intelligence, Shravan A. Mehra v. Union of India and Raghav Agrawal v. Directorate General of GST Intelligence, concerning the necessity of custodial interrogation where investigations substantially depend upon documentary evidence.
Considering that the investigation was predominantly documentary, substantial records were already with the authorities, the petitioners were permanent residents, there was no material showing a real likelihood of abscondence or tampering with evidence, and the petitioners had undertaken to cooperate, the High Court found no compelling material demonstrating that custodial interrogation was indispensable at that stage.
It accordingly allowed the criminal petition and granted anticipatory bail. The petitioners were directed to surrender before the competent authority on or before 30.07.2026 and, upon surrender or arrest, to be released on personal bonds of Rs.5,00,000 each with two sureties for a like amount each.
They were also required to furnish contact details, appear whenever directed, cooperate with the investigation, not leave India without prior permission, refrain from influencing witnesses or tampering with evidence, and comply with Section 482(2) of the BNSS.
The Court expressly preserved the investigating agency’s statutory power to arrest subsequently if circumstances warrant such action in accordance with law.
